The question of how to compensate partners is central to every practice. However, developing a plan to do so can only be effective when it results in maximum profits within the framework of a quality practice.
Older practitioners present special compensation problems. Senior professionals are unlikely to have been educated in the current "eat-what-you-kill" philosophy as younger physicians have. Today, the emphasis in most practices is on production, and compensation is directly related to the matter. These formulas often ignore the fact that profits are not always directly attributed to individual collections. They also include the profits of nonpartner physicians as well as those profits produced by paraprofessionals. And, as administrative time is necessary in any practice, its compensation cannot be based on a productivity formula alone.
Strive to Be Equitable in Practice
To be successful, compensation formulas must be equitable, and all physicians must understand and trust the formula. The following are three strategies that have worked well in past practices with older practitioners:
Focus on Satisfaction and Profitability
Less productive practitioners may be compensated based on production/collection as in the second method and not on days worked. The era of equal compensation has passed. Using incentives to motivate partners to produce greater profits cannot be ignored.
Herbert L. Lipman, CPA, is a partner in the Edison, NJ, office of New York Cityâ€“based Weiser LLP. His practice and expertise focus on medical, dental, and legal practices, as well as small- to mid-sized privately owned businesses. He frequently consults in the areas of tax, retirement, estate, and financial planning. He welcomes questions or comments at email@example.com.